ROLLUP: Markets Down | Tether $500B Raise | South Park x Polymarket | Gensler Grilled

TRANSCRIPT

Ryan Sean Adams:
[0:00] Thank you.

Ryan Sean Adams:
[0:04] bankless nation it is the last week of september and god

David Hoffman:
[0:07] Last week of down timber.

Ryan Sean Adams:
[0:09] Yeah i'm glad it's the last week of september

David Hoffman:
[0:12] We finally finally got some down in down timber.

Ryan Sean Adams:
[0:14] We did well this was promised so that this is why i'm not worried but the markets are definitely down on the week i'm just going to be glad it's over we can get into october october and we can resume the bull market right that's what the people are here for that's what i'm here for did you

David Hoffman:
[0:28] See peter's tweet today. He's like, ETH is below $4,000 despite all of the DAT buy pressure. Marking ETH officially into a bear market. Really? Peter Schiff? Peter Schiff tweeted that. That's actually bullish.

Ryan Sean Adams:
[0:42] He's usually tweeting about Bitcoin. So I'm honored to be a part of his shitposting. That's great.

David Hoffman:
[0:47] Is it in a bear market like two quarters of consecutive down prices?

Ryan Sean Adams:
[0:52] I don't know. I guess so.

David Hoffman:
[0:54] We're in three weeks of down. Where does he get off, man?

Ryan Sean Adams:
[0:57] And also, does he not know it's down timber? We've always known that this was going to happen.

David Hoffman:
[1:02] There's no bear markets in down timber. It just cancels out.

Ryan Sean Adams:
[1:05] Yeah, no victory lapping. We will not accept it. We'll be back in October. A few things to talk about today, David. Vitalik, getting bullish on DeFi. He's got a blog post heard around the world. We'll talk about that. What else we got?

David Hoffman:
[1:18] Polymarket featured on South Park. Perhaps like a top 10 mainstreaming moment for crypto. You watch South Park, right, Ryan?

Ryan Sean Adams:
[1:27] It's been a long time, but yes, of course.

David Hoffman:
[1:29] I was a big fan of South Park episodes or seasons like one through 15. And then now I lost track. But they did an entire episode on prediction markets. And it was just all Polymarket, which is great. Tether, raising money at an insane valuation. So we're going to talk about the Tether raise. What else?

Ryan Sean Adams:
[1:46] Gary Gensler makes an appearance. I really enjoyed this video clip. We're going to play it mid-episode, but he's defending his record on crypto, and he's squirming a little bit as the reporter calls him out.

David Hoffman:
[1:57] Was it CNBC?

Ryan Sean Adams:
[1:59] Either that. Yeah, CNBC, I think. Exactly, yeah. And meanwhile, Paul Atkins doing the thing that Gary Gensler should have been doing this entire time, which is cooking up some more pro-crypto regulation. So we'll talk about that.

David Hoffman:
[2:11] What was the premise as to why Gary Gensler was invited on CNBC? who is Gary Gensler now?

Ryan Sean Adams:
[2:18] I don't know.

David Hoffman:
[2:19] He's not the SEC commissioner. Who is he?

Ryan Sean Adams:
[2:21] It's not office hours anymore, is it? It's just like reflections from Gary. They just wanted to bring him on and just castigate him,

David Hoffman:
[2:27] Which I'm totally here for. Which is exactly what happened.

Ryan Sean Adams:
[2:30] That's great. And also, David, I want you to fill me in. There was a debate on crypto Twitter. It got a little ugly.

David Hoffman:
[2:35] There were some nasty things on crypto Twitter about layer two relations with securities laws. Yeah. I was not a fan of this debate. I thought we could have reformatted this debate to be much more productive, but it shows a less productive route. So we're going to talk about that.

Ryan Sean Adams:
[2:50] Yeah, it should base be regulated like the NASDAQ because it has a centralized sequencer. So we'll talk about that. But before we get into it, we're going to shout out our friends and sponsors. Speaking of tokens, David, tell us about Bitcoin, the token, where are we at on the week?

David Hoffman:
[3:05] $111,400, down 5% on the week. Ether, $4,000 flat, down 13% on the week. So this was the down timber we were promised that was foretold.

Ryan Sean Adams:
[3:16] 13%. That's pretty ugly for ETH on the week, huh?

David Hoffman:
[3:19] Yeah. I mean, I don't know about you, Ryan, but I'm here for the double-digit moves. Yeah. So, you know, you got to – either way.

Ryan Sean Adams:
[3:27] You like the pain? You're accepting of it?

David Hoffman:
[3:29] Uh-huh.

Ryan Sean Adams:
[3:30] Yeah. You know, if you're going to accept double-digit up, you got to accept double-digit down. Yeah, that's right. That's right. one of those weeks. We'll make it all up in October. Okay. If you were losing the faith, though, here is Tim Cook, the CEO of Apple, who actually is saying that he owns both Bitcoin and Ether and hasn't sold. Play the clip.

David Hoffman:
[3:52] Do you own crypto and any Bitcoin or Ethereum? Would you play around with this? I do. Yeah. I think it's reasonable as a part of a diversified portfolio. And I'm not giving anybody investment advice, by the way. When did you get interested in it? I've been interested in it for a while. And I've been researching it and so forth. And so I think it's interesting.

Ryan Sean Adams:
[4:18] Okay, well, that wasn't the most bullish clip we've ever played on. I gotta say.

David Hoffman:
[4:23] I mean, I don't go to Tim Cook to get financial advice. but I do appreciate that a guy who's on the frontier of one tech sector is looking at the frontier of another tech sector.

Ryan Sean Adams:
[4:33] I agree. Although he did answer that. It was not a Tom Lee bullishness that you'd hope for. It was kind of hedgy, right? Like, oh, yeah, people should own this as part of a well-diversified portfolio. I think it's interesting. Not quite as bullish as us, but it fits the theme for September.

David Hoffman:
[4:48] I want to hear Tim Cook give the bull case for ETH. I want to hear it.

Ryan Sean Adams:
[4:53] We'd do that episode. Tim, if you're listening, we'll schedule that. Total crypto market cap, are we above or below?

David Hoffman:
[4:59] It's a sad number. Not that sad in the grand scheme of things. 3.9 trillion. We're over 3.9 trillion, but just barely. Getting into the markets. BlackRock... It makes now $260 million of revenue for BlackRock a year from crypto. I don't know where they are in like the revenue per employee, but BlackRock has to be pretty high. So collectively, all the crypto products make BlackRock over a quarter billion dollars of revenue a year. Mainly the Bitcoin and Ether ETFs are the big ones. $220 million annually from the Bitcoin ETF, $42 million annually from the ETH ETF. Of course, they also have the Biddle Fund. Not as much revenue there. And then they have plenty of products coming down the pipe. All of this, however, is only 1.2% of BlackRock's total annual revenue. But like two years into making crypto products and crypto represents 1.2% of BlackRock's revenue. Like I'm not going to be sad about that. That's a good number.

Ryan Sean Adams:
[5:53] It's not bad. It's also, yeah, if you think about the marginal growth, it's got to be like massive in crypto relative to its other product lines, right? Because crypto has basically come from nothing, you know, two or three years ago to this. They also have the Biddle Fund, which of course is going to print them some money. and they have an ETH staking ETF that's coming down the pike. James Saifert said that he expects that in October, which is pretty bullish.

David Hoffman:
[6:17] October, during October.

Ryan Sean Adams:
[6:19] Perfect timing, well done. Also, David, BitGo filed for an IPO. I'm not sure that everyone in crypto actually knows the name BitGo, but they've been in the space for a long time. Who's BitGo?

David Hoffman:
[6:31] BitGo is like the OG crypto custodian. Probably a crypto custodian, I think, even before Ethereum was around. I think that's true. Filed for an IPO under the NYSE, under the ticker BTGO. And of course, part of this process is you show your cards, you reveal your financials. So we are able to talk about BitGo's financials. $4.2 billion in revenue in the first half of 2025, which is a monster amount of revenue. I actually had no idea that a custodian could make that much revenue. Apparently, the story of custodianship, and we're just learning this, is like you make a ton of revenue, but you have a lot of operating expenses, which... Isn't intuitive to me. So they had a $12.6 million profit so far this year in the first half of 2025 after making $4 billion in revenue.

Ryan Sean Adams:
[7:16] Paper thin margins there. Paper thin margins.

David Hoffman:
[7:18] Yeah, kind of crazy. I actually don't understand that. Somebody else who knows the custodian business model probably knows why revenue is so high and net profit is so low. But nonetheless, pursuing a dual-class share structure, so Class A shares for public, Class B shares amongst some of the current owners like the CEO, etc. Expected to be listed in Q4 2025 this year or early 2026. So just another crypto company going public in the most favorable time to ever go public in the history of crypto.

Ryan Sean Adams:
[7:49] Managing over $90 billion in crypto inside of BitGo. And almost 50% of that is Bitcoin. Same. This is kind of interesting. SUI, Solana, XRP, like SUI is 20%, Solana 5%, XRP 3.9%. Ethereum is only 3%, which relative to market share seems like really low compared to Bitcoin.

David Hoffman:
[8:09] Don't put your ETH in a bank, dude. Put it in DeFi.

Ryan Sean Adams:
[8:14] All right. Fair enough, David.

David Hoffman:
[8:15] If the asset's productive on chain, put it on chain.

Ryan Sean Adams:
[8:19] Yeah. You wouldn't want to hold it in BitGo, I guess. I mean, I wonder if BitGo is offering any kind of yield or anything the way Fireblocks does. Anyway, it's all part of the public filings, I'm sure, so you can find out more. It's another good public stock offering of a crypto company. Speaking of big offerings, David, tell me about Tether.

David Hoffman:
[8:37] Wants to raise at a $500 billion valuation. So they are trying to look for $15 to $20 billion through private placement. Yeah. What does Tether Dean money for? They're a money printing machine. Anyways, they're offering a 3% equity stake for somewhere between $15 and $20 billion for sale. Apollo has confirmed that the company is assessing funding from a select group of prominent investors, but no further details have been shared. That would put Tether shoulder to shoulder with OpenAI and SpaceX.

Ryan Sean Adams:
[9:09] Wow.

David Hoffman:
[9:10] Dude, the theme of the 2020s are just gargantuan companies that are private. that you cannot buy. Stripe is a big one. OpenAI, SpaceX. You can get your hands on a SpaceX shares if you really try. But like still, private company. Why do they want to raise? They want it for significant expansion beyond stable coins, including ventures into AI, energy, infrastructure, commodity trading, communications, and media, which just seems like, okay, this is Tether's venture portfolio. So I guess they're just looking to raise $20 billion to be a VC fund, which at that size, you can kind of do whatever, man.

Ryan Sean Adams:
[9:46] They could do a lot. I mean, they can do a lot at 500 billion. The scale of this company is still like, what, 100, 150 employees. So relative to the employee count of these other, like OpenAI or SpaceX, I mean, just quite a difference. Also, this would make Chairman Giancarlo DeVicini the fifth richest person. So I've actually not. Yeah, on paper. I don't.

David Hoffman:
[10:09] I've not actually heard of this individual.

Ryan Sean Adams:
[10:12] Right?

David Hoffman:
[10:12] I have not. I have not. But yeah, apparently a large equity holder of Tether.

Ryan Sean Adams:
[10:17] Yeah. His net worth would reach approximately $224 billion, making him the fifth richest person in the world behind Musk, Ellison, Zuckerberg, Jeff Bezos. I guess CZ maybe got knocked down. He used to be on the top 10 list. But you got two crypto people in the top 10, and none of them are Sam Bagman-Fried.

David Hoffman:
[10:36] He is the chief financial officer of Bitfinex and a co-founder of Tether. Yeah. I think Paolo sold a lot of his, not a lot, but a chunk of his equity stake in Tether a while ago. He owns like 10% or 15% of Tether or something like that, which is just plenty.

Ryan Sean Adams:
[10:53] Incredible, right? Okay. So, top assets by market cap, right? This would put a $500 billion valuation. It puts Tether in the top 25. And notably, David, puts Tether above Ethereum. okay that's a flippening of sorts yes it does it does it does so if you're gonna go like look at kind of because

David Hoffman:
[11:15] It went down 14 this week eth is at 480 billion dollars yeah so tether at number two.

Ryan Sean Adams:
[11:23] The biggest assets that crypto has produced right now are bitcoin number one you know 2.2 trillion tether number two at 500 billion and ether coming in at number three right now 483 billion yeah so okay let me ask you but

David Hoffman:
[11:38] Tether needs to tokenize its equity to be on coin gecko.

Ryan Sean Adams:
[11:42] Yeah so it's not on chain that's true uh but let me ask you dollar for dollar right considering you're about the same valuation would you rather put a hundred dollars into ether at this price or $100 into Tether?

David Hoffman:
[11:57] Dude.

Ryan Sean Adams:
[11:58] And why is your answer Ether?

David Hoffman:
[12:01] Do you think USDT will ever flip ETH?

Ryan Sean Adams:
[12:04] I think that's conceivable. I mean, there's going to be so many stable coins in the future, right? But that's the thing. If you're betting on Tether, you're specifically betting on not all stable coins. You're betting on Tether, right? And this is a time where they have a massive amount of market share. Can they maintain it? They have the Genius Bill, but new entrants are entering. I guess some people would say Ethereum has competitors too but it feels much more differentiated to me and yeah it's a different totally different asset I suppose I

David Hoffman:
[12:35] Don't know I can see USDT flipping ETH in like, Many years.

Ryan Sean Adams:
[12:41] It'd be kind of nice to own both. But you can't, David. Sorry, it's a private company. You can't own each other.

David Hoffman:
[12:46] What do we got coming up? We wouldn't want to. Anyways, coming up next, Polymarket on South Park. South Park actually does just a great job explaining what a prediction market is. Obviously, they had to because the whole episode was about prediction markets. So we're going to talk about that. And then Gary Gensler speaks. He's back being an influencer on CNBC. But he's in a little bit of a hot seat. So we're going to go just have some schadenfreude moments while we watch this clip. And then the White House is gearing up to sign the infrastructure bill by the end of this year. And Paul Atkins has a few more pro-crypto regulations up his sleeves. So we're going to get to all of that and more. But first, a moment to talk about some of these fantastic sponsors that make this show possible. Season 27 of South Park, episode number five, named Conflict of Interest. It's an entire episode about prediction markets. Let's go actually hear what a prediction market is from the three, four kiddos, Kenny, I've forgotten their names, Stan, Kyle, and Cartman. And Cartman. Yeah, let's go hear them explain what a prediction market is. What are you guys talking about? Prediction market app, dude. You know, online peer-to-peer betting. Yeah, social platform betting. People can make any bet they want and then other users take them up on it. Really? Yeah, it's pretty sweet, dude. People bet on anything, even stuff here at the SKU. See? Will the girls' soccer team win on Friday? Will there be a snow day this month? Will Kyle's mom strike Gaza and destroy a Palestinian hospital? Will school lunch have tater tots next week?

Ryan Sean Adams:
[14:05] That's great. There's another clip, too, right?

David Hoffman:
[14:09] Yeah, we're going to watch another one.

Ryan Sean Adams:
[14:10] Yeah, let's play this one.

David Hoffman:
[14:12] U.S. Fat News!

Ryan Sean Adams:
[14:15] They're called prediction market apps, controversial online betting that's found a loophole around normal gambling laws. And, of course, the number one trending bet on the apps, will President Trump and Satan's baby be a boy or a girl? That's right, prediction market apps are going crazy right now. The bettors on Polymarket are at nearly 60%. The demonic butt baby's going to be a girl. That's great. Wow.

David Hoffman:
[14:41] If you had no idea what a prediction market was, and you are just a normal fan of South Park, you're like, oh, that's kind of cool. That's pretty cool.

Ryan Sean Adams:
[14:49] They called it a social betting platform.

David Hoffman:
[14:52] Yeah, that was interesting. They added the word social in there. I mean, there is a very strong social element on Polymarket. There's like the comment section, people talking shit about each other. Yeah, it was pretty social.

Ryan Sean Adams:
[15:03] I actually think of all of the things, right? So like, sure, South Park did a good job explaining that, putting it in context, making it hilarious, whatever. but also of all of the things that crypto has produced i feel like prediction markets are one of the easiest things to understand yeah because they're like everyday events i mean who's going to win what's

David Hoffman:
[15:25] Going to happen what's going to happen.

Ryan Sean Adams:
[15:26] In the future this or that and many of the options are binary or they have some sort of you know um like outcome that um you know could be devised and and well everyone's

David Hoffman:
[15:36] Grown up and like made a bet with a friend yeah you know it's like, hey, I bet you that this is going to happen. Everyone's done that.

Ryan Sean Adams:
[15:42] It's funny though that they call it a loophole, right? It's a gambling loophole because there is a strong element of gambling too, but it doesn't have to be gambling, right? It's like, are you gambling? Are you speculating? Or are you investing, right? It depends how you approach these things. I think there's going to be a certain portion of the population who's just straight up gambling or speculating. And then there's going to be another portion of actual professionals who do prediction markets for a living and they trade them and they're informed with their takes and they take calculated bets and they win more than they lose and they make a go of it. They make money on it, right? Yeah.

David Hoffman:
[16:24] So it's all of these things. I mean, the difference between gambling and not gambling is skill. Is it skill-based?

Ryan Sean Adams:
[16:31] And knowledge.

David Hoffman:
[16:31] Yeah. Like roulette, not skill-based. Blackjack like skill-based up to a point, like up to 49% chance of winning. But like prediction markets inherently skill knowledge-based. Like there are people who are good and there are people who are bad and there are people who are informed and there are people who are uninformed. And that makes it not gambling.

Ryan Sean Adams:
[16:50] It's also the reason you do it too, right? I could participate in some prediction markets just by way of entertainment. And that might be more entertainment slash gambling. Yeah. Whereas other prediction markets where I have some sort of special knowledge where I really like want to research, I could be an investor.

David Hoffman:
[17:06] Like Kane versus Hoffman 2025.

Ryan Sean Adams:
[17:08] Yeah, that special knowledge.

David Hoffman:
[17:09] Yeah, there was Alpha there.

Ryan Sean Adams:
[17:10] There was Alpha there. That was fantastic. You should do that again, David. Did you guys talk? Actually, you have a podcast you did with Kane Warwick, right?

David Hoffman:
[17:18] Yeah, me and Kane did a 30-minute podcast. Did you guys talk about a rematch? He is fighting. Who is he fighting? Yeah. He's fighting somebody in a boxing match soon, actually.

Ryan Sean Adams:
[17:30] Oh, my God.

David Hoffman:
[17:30] Bitlord. Bitlord. He's a trader. He's like this Australian trader guy.

Ryan Sean Adams:
[17:35] So Kane has kept this up? He wasn't just one and done? He got addicted?

David Hoffman:
[17:38] Kane is very competitive, and he lost his first round, and so he needs to get a victory under his belt.

Ryan Sean Adams:
[17:46] So for people who don't know Bankless Lore, like David Hoffman fought Kane Warwick, DeFi founder, Synthetix founder, Infix founder.

David Hoffman:
[17:55] I spent $6,000 on myself on my own Polymarket about four hours before I fought Cain.

Ryan Sean Adams:
[18:01] That was Polymarket's true mainstream moment, I have to believe.

David Hoffman:
[18:06] And overall, there's just this conversation that's kind of murmuring up on CryptoTitter. I don't know if you're paying attention to it, of like this notion of live finance entertainment. I don't know what the right title for this whole thing is, but it's like live betting on finance-related things. And so Polymarket is like related to this. Just think about a combination of somebody live streaming a Polymarket or something related, and then there's Polymarket embedded there. Or what we're looking at on the screen here is some bar in South Korea has a projected perps trading platform up on the screen, and that's the entertainment. It's like somebody is up there making trades. There's a competition here, and people are just betting. They're taking leverage bets on some perps platform, and then, I don't know, maybe at the end of the hour, whoever has more money wins. And this is just entertainment for people. And this is also related to PumpFun's live streaming platform as well. There's just like a growing trend towards live, live streaming, finance streaming. gambling entertainment and that's becoming like a pretty strong like movement that people are paying attention to what.

Ryan Sean Adams:
[19:10] Do you think of this how does this make you feel watching this

David Hoffman:
[19:13] Um uh i mean double-edged sword i feel uh it's i feel definitely uh strong that it is the future yeah like zoomers are into this for sure this is like zoomer coded for sure one.

Ryan Sean Adams:
[19:26] Benefit i think is it makes everybody much more financially literate doesn't it i mean like looking at candles like Like you're trading in this way, right? Everyone's getting financial literacy by route of degeneracy. So maybe that's positive.

David Hoffman:
[19:41] That's how I did it.

Ryan Sean Adams:
[19:43] Well done. That's how many people did in crypto.

David Hoffman:
[19:46] My version of degeneracy was putting my entire net worth into Ether in 2018. By today's standards, that's just not degenerate at all. That's just responsible.

Ryan Sean Adams:
[19:58] Well, speaking of being responsible, Mr. Responsible here, Gary Gensler, has been the most responsible SEC chair we've ever had.

David Hoffman:
[20:07] So responsible.

Ryan Sean Adams:
[20:08] So incredibly responsible. This is just entertaining. So he came on CNBC, and the reporter who was interviewing him really held his feet to the fire. I'm just going to play the clip because I think you guys will appreciate this. This is Gary.

David Hoffman:
[20:20] Your community is ecstatic not to have you there anymore and to have him there right now. What you did around securities and enforcement actions. Looking back on it, do you think that was the right call? Yes, I think. Because look, now we have this burgeoning industry and there's so much more innovation and leadership in the U.S. And a lot more capital coming in too. There may be more capital in terms of the interest in the public. The public is interested. I get that.

David Hoffman:
[20:56] I took an oath of office. I also ran a law enforcement agency. And my predecessor, Jay Clayton, a very fine individual, ran the SEC. He's now the head of the law enforcement agency, again, up here in New York, was bringing many cases in this field, was bringing, over his tenure, about 80 to 100 cases. Over my tenure, we brought about 100 cases. We were consistently trying to insure for investor protection. And in the midst of it, we had a lot of fraudsters. Look at Sam Bankman-Fried, and he wasn't alone. And so investor protection. So when I look at the field that trades mostly on momentum, mostly on, frankly, hype for investors.

David Hoffman:
[21:46] You think this is dangerous, what they're doing? I think that for investors, everyday investors, the 5% to 10% of Americans who invest in crypto, and it's hard to get the real, you know, but that it's a highly speculative, very risky asset. And most of these tokens, put aside Bitcoin, but most of the other tokens are not tied to any fundamentals. And there's 5,000 or 10,000 of these tokens. So usually over time, you find new equilibriums. Like Warren Buffett would say, what are the goods? What are the revenues? What are they selling? And so forth.

Ryan Sean Adams:
[22:26] There it is, David. Gary Gensler defending his record. He would give himself an A or an A plus, I think, for his performance as SEC chair.

David Hoffman:
[22:34] I love how he cites SBF as the reason why crypto is full of frauds. And SVF was the one person who got a meeting with Gary Gensler that didn't walk out with a fine.

Ryan Sean Adams:
[22:45] Right. Yeah. I... It's unbelievable. I guess he's, I mean, I love that the reporter asked him straight up and like, do you think that what Paul Atkins is doing is like unsafe? I mean, everyone seems to love it.

David Hoffman:
[22:59] They're like, ever since you left, things in crypto have been great.

Ryan Sean Adams:
[23:04] And like, you know, the world didn't end, right? As Gary said it would if we did all of these things in crypto.

David Hoffman:
[23:11] The big thing that I take away from that is like, oh, he's just so paternalistic. He's such a nanny stater. He's like, yeah, there's no revenues. Therefore, it's my responsibility to not allow the public to have opinions on these things. Get with the times, Gary.

Ryan Sean Adams:
[23:26] Yeah, I feel like I'll never understand. But I don't think history will judge his tenure as SEC chair very favorably. In comparison to just like Paul Adkins gets there. The SEC has a turnaround. Things go on chain. America's financial system gets an upgrade. I think the history books will see this as a good thing. And Gary Gensler is just somebody who was just throwing sand in the gears for absolutely no reason.

David Hoffman:
[23:51] Just a huge narc.

Ryan Sean Adams:
[23:52] Speaking of this, SEC plans to introduce innovation exemption for crypto firms. So this is Paul Atkins on Fox News. What is this, David?

David Hoffman:
[24:02] So this exemption allows some qualifying firms in crypto. So you have to qualify it. And in some cases, non-crypto companies too, to launch on-chain products more quickly. So you just get to bypass some regulatory requirements that might not fit new technology. Something that we've been asking for the SEC for years now, the idea of like

David Hoffman:
[24:20] a regulatory sandbox or the concept of a regulatory sandbox comes to mind. So just temporary relief, temporary, so not permanent, from older securities rules. Older securities rules says the Howey test come to mind, Ryan, the thing made in 1930 about orange tree groves. Yeah. While the SEC develops some crypto-specific regulations. So it's kind of like a stopgap and be like, hey, Old anachronistic laws don't apply to you guys for a temporary period. And also during that temporary period, it's our job to come up with better laws. So the final scope will depend on a public comment period and a forthcoming rulemaking procedure.

Ryan Sean Adams:
[24:58] Yeah, so they'll just do this via rulemaking, which is within their authority, right? They could always do this. And now it seems like Chair Atkins is signaling that they are going to do this. This has remained a really good idea, just to have a sandbox. Do you think this means, David, that we don't have to have VPNs and go to different countries in order to pick up our airdrops anymore?

David Hoffman:
[25:18] Our airdrops. There's a lot of airdrops that you claimed, actually.

Ryan Sean Adams:
[25:22] It's been a while. It's been a while. But I don't see tweets on Twitter. I don't see screenshots of VPN blocks the way I used to. So the walls have got to be coming down. There is some rumor. So we have a favorable SEC chair, of course, but we don't yet have a chair of the CFTC. Like that position has been vacant. And I think the hope is that crypto would get a crypto-favorable CFTC chair. What's been the holdup so far?

David Hoffman:
[25:54] I don't know. You don't know? You tell me.

Ryan Sean Adams:
[25:57] Actually, okay. So we did an episode with Summer Mercenier and your internet cut off before we actually talked about this.

David Hoffman:
[26:02] Did I drop at the alpha?

Ryan Sean Adams:
[26:04] Yeah, you dropped. You dropped at the alpha. So there was a conversation. It seemed like the contender for the CFTC chair was Brian Quintens. who is crypto-favorable, previous Bankless Podcast guest.

David Hoffman:
[26:14] Previous CFTC commissioner.

Ryan Sean Adams:
[26:16] Yes, and he is head of policy, A16Z, crypto. Anyway, there's been some back and forth between him and actually the Winklevoss twins from Gemini who were apparently behind the scenes. This is all, you know, DC gossip. Who are on Trump's,

David Hoffman:
[26:33] Like, bench of supporters.

Ryan Sean Adams:
[26:35] Yeah, bench for crypto supporters, also big donors, this type of thing. And there's talk that they were actively blocking Quintenz from getting the nomination. Like, you know, Quintenz had gone in front of the Senate, you know, was just like up for a confirmation hearing. And, you know, now the White House, something that hasn't happened before, they withdrew his nomination.

David Hoffman:
[26:56] So it's kind of in limbo. Because the Winklevi were like, read about it?

Ryan Sean Adams:
[26:59] That's what it seems like. And so there's back and forth. Again, this gets into kind of gossip mode, rumor mode. So I don't know all the details. But the position, the net of it is,

Ryan Sean Adams:
[27:08] the position is still empty today. Except, David, you uncovered a rumor this week that there could be a possible solution to this. What's this?

David Hoffman:
[27:18] Yeah, I saw this tweet circulating around that there are the rumor that the White House is considering Paul Atkins for the CFTC chair. Now, that should be a record scratch moment. Paul Atkins is the current SEC chair, and we love that fact. So the idea that the White House is also considering Atkins for a CFTC chair... You can do that? How many chairs are you sitting on right now, Ryan?

Ryan Sean Adams:
[27:45] Yeah, that's right. That's right. Are you sitting on one chair? I'm sitting on one chair.

David Hoffman:
[27:49] They want Paul Atkins to sit on two chairs, the CFTC chair and the SEC chair. I don't know if you can do that, but the way that Paul Atkins is leading the SEC, I would be happy with him. Endorse that same leadership of the CFTC. And also, you know what? This asks a bigger question. Can we just combine these two things? Why are they separate? let's just create one large financial markets oversight agency which is combined the SEC and CFTC's roles anyways let's make things more efficient they fight with each other anyways just make them the same agency.

Ryan Sean Adams:
[28:24] Especially related to crypto policy I mean that would advance the agenda quite a bit because that would stop the infighting almost immediately it is unclear apparently legally if you can do this it's definitely unprecedented but it's not clear that you can't do this. And who is, you know, Donald Trump if he's not just like somebody who breaks with convention from time to time, right?

David Hoffman:
[28:50] And honestly, if it's the bill of Doge's mandate of making government smaller, like make, combine agencies.

Ryan Sean Adams:
[28:57] Combine the things.

David Hoffman:
[28:58] This is what Elon Musk loves to do is like, you know, don't optimize something that can be eliminated. Yeah. Just eliminate two agencies, replace them with one agency and we have a smaller government. Well, you probably.

Ryan Sean Adams:
[29:08] Can't do a full replacement just because there's, you know, It's hard-coded in the law, various things CFTC has rule over and various things that the SEC has rule over.

David Hoffman:
[29:17] I'm making an if this, then that statement that if it said it's CFTC, it's now the finance markets regulated.

Ryan Sean Adams:
[29:22] I think it's in that spirit. And again, this is all complete rumor mill stuff. Neither David nor myself know. But at some level, I wouldn't be surprised if I saw this headline in the next couple of weeks that Paul Atkins is also the CFTC chair.

David Hoffman:
[29:36] The Democrats are like, they're consolidating power.

Ryan Sean Adams:
[29:39] Yes, yes. True. David, speaking of that, we want to get both the Democrats and the Republicans on the side of the Clarity Act. Well, it's actually not called the Clarity Act in the Senate. It's called the Market Structures Bill. I don't think it has a name yet. Hopefully they give it a good name.

Ryan Sean Adams:
[29:56] The White House is saying it hopes to have this infrastructure bill, which would be along the lines of the Clarity Act, which designates what's a security and what's a commodity with respect to crypto by the end of the year. So this is Patrick Witt, executive director of the White House. He said, we're unblocking what we can. We're serving as a referee when there's kind of an impasse and we're weighing in where necessary, doing as much as possible to push this out. I don't know. We should actually look at the polymarket on whether market structure happens by the end of the year.

David Hoffman:
[30:28] Polymarket's reporting 40% chance. Not that much volume, though. That's $16,000.

Ryan Sean Adams:
[30:35] Yeah, that's not that much volume. But I will say 40% is actually better odds than I thought. I thought that this would be lower. I think it's going to be hard to get more legislation through on crypto.

David Hoffman:
[30:45] Is this Trump just saying, hey, get this to my desk? The same thing that he did with the Genius Act?

Ryan Sean Adams:
[30:50] I think so. But, you know, are the senators as motivated to do that now in today's climate? Probably the answer is no.

David Hoffman:
[30:57] I was chatting with Austin Campbell a while ago, and he was very bearish on the Clarity Act getting passed as it stood because he thinks it was just too large. He thinks that it really needed to get unbundled and passed in, like, smaller bundles, more narrow bundles because there's just too much to debate about. And that was, like, six months ago.

Ryan Sean Adams:
[31:16] Yeah. And you know, the Democrats, of course, in the Senate, I'm sure they'll try to stick things like, you know, conflict of interest type things, try to prevent Trump from doing, you know, meme coins and sample coins and all of these things.

David Hoffman:
[31:27] Which I am fine with.

Ryan Sean Adams:
[31:28] Yeah, you're fine with. But like, will Trump sign that? And will the Republicans sign on for that, right? So hard to make everybody happy in Congress. David, what do we have coming up?

David Hoffman:
[31:38] Coming up next, we're going to talk about Vitalik being bullish on DeFi formally and trining that position, that opinion into an article. So we're going to talk about that. Will Synthetix give Ethereum Layer 1, the Ethereum Layer 1, its own hyperliquid? There's a thing called an optimistic execution engine that Synthetix has created. I want to tell you about that, Ryan. Oh, cool. And I'll quote myself on the episode that I did with Cain when we talked about this. I was like, well, what the fuck are we doing with the role of Centric Roadmap then? Anyways. And then debate on crypto Twitter. The best place to have this debate should base be regulated as a securities exchange because crypto Twitter totally knows.

David Hoffman:
[32:19] So we're going to talk about all that conversation and more. But first, I'm going to talk about some of these fantastic sponsors that makes this show possible.

Ryan Sean Adams:
[32:24] Starting with Vitalik is officially bullish on DeFi. He says it here. He says low risk DeFi can be for Ethereum what search was for Google. David, we did an entire episode on this article and gave all of our takes and went through the article. So we don't need to repeat that. If you guys haven't heard that, you can go catch that on the feed. But what's your summary of what Vitalik was saying here?

David Hoffman:
[32:48] The summary is that DeFi has been proven to be, not just theorized to be, but proven to be sufficiently better returns, risk to reward profile for the whole entire globe. So like losses, total losses in DeFi over the last two years as a percentage of deposits into DeFi is something like 0.1%. So your chances of loss is very, very low. Meanwhile, you can get like 6% APY on your dollars in Aave. And not only that, but Ethereum is now connected to the rest of finance. And so people in developing countries, you know, the long tail of countries can use DeFi appropriately, sufficiently low risk. It's accessible to them. And it's way better financial infrastructure than they would ever be able to assess in their local country. That's their main point. That's his main point about DeFi. The other main point is that it's aligned with the values of Ethereum. And so DeFi, it adds value to ETH. It adds transaction fees to the Ethereum blockchain. Overall, it's overall aligned with Ethereum. And it can, thirdly, third point, be the economic backbone that can afford Ethereum a bunch of moonshot investments. And so that's where Vitalik makes a comparison with Google. Google's ad search revenue, gargantuan ad search revenue. So whereas Google gets basically most of its valuation. And then afforded Google the ability to invest in things like Apple Maps. Or, excuse me, Google Maps.

Ryan Sean Adams:
[34:12] Yeah.

David Hoffman:
[34:13] Gmail, Gemini, like all these other things that were investments, like speculative investments that ulted up being just complete moonshots and also just created the gargantuan valuation that Google has. So that's it. That's the summary of it. We did a whole entire episode. There's a lot more to unpack about it. There's a link in the show notes. You should totally go watch that episode.

Ryan Sean Adams:
[34:32] Yeah, I'll just add that that's exactly right. I'll just add some people are asking the question of like, wait, Vitalik's just suddenly bullish on DeFi. Isn't this like five to 10 years too late? And the point we make in that episode and just maybe to reiterate right now is as people have been watching Vitalik for a while, the guy has a really high bar for being bullish on something and like recommending and saying that it's ready for the world. And this is low risk DeFi, specific category of DeFi, things like collateral back loans and stable coins, things like basic swapping and trading on Uniswap, on Ethereum layer one. This is him saying that this is now ready for primetime for any country, any society to adopt and the rewards far outweigh the risks. And like, we've done something good. We've done something net new and we've done something good and it's ready for the world. So his bar has been incredibly high on that score. And so this is, I think, a milestone for, you know, how Vitalik is kind of viewing use cases on the thing that he created, which is Ethereum.

David Hoffman:
[35:39] And he didn't explicitly say it, but he kind of implied it. Like, he almost, he got right up to it. And he said, like, Ethereum is DeFi. Yeah. Like, that is what we are doing here. And a DeFi will be the backbone that supports everything else. Yep. Which I think you and I totally agree with.

Ryan Sean Adams:
[35:55] We do. That's why we did this whole podcast. That's why we're doing this whole bankless thing. Brian Armstrong seems to agree, too. So they are continuing to roll out their DeFi mullet,

David Hoffman:
[36:05] Which is like a nice. DeFi mullet's getting longer.

Ryan Sean Adams:
[36:06] Yep. Nice flush.

David Hoffman:
[36:07] Which is ironic because Brian's bald.

Ryan Sean Adams:
[36:10] Nice polished fintech in the front, though. You get the Coinbase app. And on the back, these yields from USDC, I believe this is coming from Morpho, which is primarily some of that low risk DeFi on Ethereum layer one. Also based, also other platforms, of course. But this is now in a much more accessible user interface than it ever has been before.

David Hoffman:
[36:32] So ultimately, I think this is going to be the reason why outflows come out of banks and go on chain. Yeah, it's because first the crypto banks make it easy and then people are like, well, let me just skip the crypto bank and just do this myself. Not everyone, not your grandma, but like, you know, you and me and the listener, you know, in the Ethereum world, Synthetix is coming back to Ethereum with a perpdex. since I've always been on Ethereum, it is now introducing a perpdex, an Ethereum perpdex on the Ethereum layer one. When I say, Ryan, a perpdex on the Ethereum layer one, what flags in your brain? Is anything wrong with that statement?

Ryan Sean Adams:
[37:09] Well, it's hard, right? I mean, we've had perpdexes before on Ethereum layer one that have actually migrated. DYDX comes to mind. They migrated to StarkNet, and then they further migrated to an independent Cosmos chain because Ethereum wasn't scaling. That's what comes to mind.

David Hoffman:
[37:25] Yeah, the idea of a PerpDex on a blockchain that has 12-second blocks is just crazy because you need extremely low latency to trade. You can't just be waiting 12 seconds to get your trades through. That doesn't make any sense. Right. So, Ryan, I'm sure you're asking, well, how are they doing this?

Ryan Sean Adams:
[37:41] How are they doing this?

David Hoffman:
[37:42] How are they doing this? So they have a centralized server, a centralized order matching engine that bundles up trades every 12 seconds and then settles it to the Ethereum layer 1 every block. Okay. Does that sound like a roll-up to you?

Ryan Sean Adams:
[37:55] It does. Do they not call it a roll-up?

David Hoffman:
[37:57] Is this not a roll-up? Because it's just completely trusted centralized server for 12 seconds. And then they just bundle up the transactions and make a single transaction on the Ethereum layer one.

Ryan Sean Adams:
[38:08] So you have to trust it for 12 seconds. Correct. But then after that,

David Hoffman:
[38:11] It's good. But then after that, it's good.

Ryan Sean Adams:
[38:13] I'm fine with that.

David Hoffman:
[38:15] I'm totally fine with that. And then you get centralized server latency speeds and you're just using the Ethereum layer one. And so when Kane was explaining this to me, I'm like, why haven't we been doing that for years?

Ryan Sean Adams:
[38:26] Are the gas fees pretty expensive for doing these? For all the bundling, I imagine that would have to be amortized over all of the different transactions.

David Hoffman:
[38:35] I'm assuming that's amortized. I'm assuming that's amortized. Yeah. Okay. And probably just paid for by Synthetix. Yeah. So they're kicking this off. So, the Ethereum Layer 1 Perpdex, aka Synthetix, is doing a $1 million trading competition. Ryan, I'm encouraging you to sign up. No. Because it's only for KOLs. So, there's only 100 KOLs.

Ryan Sean Adams:
[38:56] No one wants to do any, like, I'm not a KOL in any trading. Okay.

David Hoffman:
[39:01] So, there's going to be, do you remember Dejan Spartan?

Ryan Sean Adams:
[39:04] Yeah.

David Hoffman:
[39:05] He's coming back to trade. No way. He's coming back. Okay.

Ryan Sean Adams:
[39:08] Wow. Okay. So, they're going to have some actual trader KOLs on.

David Hoffman:
[39:11] And so there are going to be people who are making opinionated trades. I think what you, and so if you blow up, if you blow up, you can get bought back in by your community. So the community can pay, like give you more chips if they think that you should be back in. And so it's like partly like a popularity contest. Here's what I think you should do. You sign up. All you do is smash 10X Long ETH. And if you blow up, the Bankless community has got you, dude. We'll push you back in and then you just do it again. And you do it until it works.

Ryan Sean Adams:
[39:40] I'll let you do that, David. I feel like that's more resonant with your personality. This is really cool. This is at a time when the perp wars are really heating up, right? You obviously have Hyperliquid, who's made a fantastic run. And then Ossizi and Binance is kind of this Aster platform that's taken some of the steam out of Hyperliquid. It seems like we're getting all sorts of different perps, exchanges, trying to draft off of what Hyperliquid is doing this cycle. One question I have for you is like, how... How loyal do you think perp traders actually are to a specific platform? So I feel like every single cycle we get a new class or a new group of perp exchanges. And the liquidity will just like go from one to another. I'm not sure that the loyalty is there. I think some of this capital is pretty mercenary.

David Hoffman:
[40:30] Yeah. I think trader capital inherently is mercenary because it's like I'm here to make a profit. That's what I'm doing here. Granted, somehow at the same time, Hyperliquid has been able to encourage an incredibly loud, committed fear base at the same time.

Ryan Sean Adams:
[40:45] Part of that is tokens, of course, and part of that is liquidity. I mean, liquidity is the moat. That's the big thing that you're getting out of this. Oh, actually, you have an episode with Cain, right? We talked about that earlier in the episode, but that's on the Bankless Premium feed. So if you want to get access to what Synthetix is doing with eFlayer1 perps, upgrade your citizenship become a bankless premium subscriber that

David Hoffman:
[41:09] Alpha got on the premium feed a while ago okay Ryan are you ready to debate

David Hoffman:
[41:13] whether base should be regulated like Nasdaq yes.

Ryan Sean Adams:
[41:16] Could you just tee up this debate first

David Hoffman:
[41:19] Okay so the context for this debate is all the blockchains are gearing up to try and support as many tokenized equities stocks real world assets as possible we all know that that's the meta in front of us every chain is trying to position themselves for that and then And these things.

Ryan Sean Adams:
[41:36] Importantly, are regulated. These are all securities, equities.

David Hoffman:
[41:40] Yeah, at least the securities are. Like tokenized real world assets, probably also securities.

Ryan Sean Adams:
[41:44] Many of them are securities,

David Hoffman:
[41:45] Right? Many of them, yeah, yeah, yeah. And so now the architecture of these chains really matters because there is something in conflict about a centralized sequencer and securities, trading securities. So if you are operating a centralized sequencer and securities are trading on your blockchain, and Does that make you a securities exchange and do you need to register?

Ryan Sean Adams:
[42:09] Yeah, essentially, does that make you like NASDAQ or the New York Stock Exchange, right? And it's like some of this is written in the 1930s, 1940s Act securities law, which is basically if you are an exchange and it has the term exchange and you're exchanging securities, then you are a securities exchange. And there's a whole set of regulations that applies to you. And so what is the question? whether our blockchains are actually meet the definition of being a securities exchange?

David Hoffman:
[42:41] I think it's the difference between blockchains and layer twos. And is there a difference there at all? And so Paul Graywall, the chief legal officer at Coinbase, he put out this tweet, which was like very clearly like, hey, base is just a normal blockchain. Yes, it's a layer two, but that doesn't change its relationship to securities laws. And so in the second tweet, He says, the SEC defines an exchange as providing a marketplace for bringing together buyers and sellers of securities. But layer twos are general purpose blockchains that operate as infrastructure. So he's stepping away from the notion that base is a marketplace that brings together buyers and sellers of securities. He says they, they being layer twos, process messages as code, smart contracts, and batch all transactions together, payments, calls, messages, while deferring any formal order interaction slash matching rules, which is an AMM, a club, an auction, to the app layer, the app layer's smart contract. So what he's doing is he's saying, hey, base is just a blockchain. We're just dumb code, just dumb pipes. We don't do any matching. And that's the clear distinction is Paul is saying we don't have opinions about matching. We are not matching buyers and sellers of securities. We are just a messaging data layer, a blockchain layer. And so he's trying to make that distinction between the AMM is the matching engine. Sure. Or the CLOB. Or the CLOB is the matching engine. And we don't have any opinions and we don't interact with the ordering of transactions.

Ryan Sean Adams:
[44:09] Yeah. He's saying that base is just like AWS. Yes. just kind of on-chain infrastructure in the way that AWS is cloud infrastructure, right? Yeah. Okay, so what's wrong with that argument? That seems reasonable. Is it contingent on the idea that so base is operating as a centralized sequencer? So it is not only, I guess the infrastructure portion that it's running is the ability to order messages that happen on the chain. Is that the sticking point?

David Hoffman:
[44:43] Yeah, so the opposite side of this, which Max Resnick, a known securities law expert on Twitter, was able, was voicing this. So he tweeted out a centralized sequencer that can change the matching slash execution of orders obviously must be regulated. Otherwise, any exchange could set up a, quote, immutable matching engine program and run their own server provider in order to bypass all U.S. securities laws. Basically, he's saying, I think what he's saying is that, like, yeah, in theory, base could be more opinionated about the matching of transactions. Right now, so this came in, he was retweeting a tweet from Jesse, who was saying...

Ryan Sean Adams:
[45:22] Jesse Pollock from base.

David Hoffman:
[45:24] Jesse Pollock, yeah. So he's talking about the nature of the base layer 2 sequencer. He says the sequencer collects users' transactions, orders them on a first-in, first-out basis, computes the resulting state changes and then batches them to the Ethereum layer 1 basically the basic operation of a sequencer there's also a priority auction with base and so Jesse kind of like left that out but I think, I don't want to try and infer people's words but like Jesse what Jesse's saying is we are unopinionated about matching so you can you have the priority lane and so you can pay to get ahead and then you also have a first in first out after that But all of that is just code.

Ryan Sean Adams:
[46:05] And then also, by the way, there is the ability to force transactions and bypass the centralized sequencer as well. This is not the fast lane. This is the slow route. But you can do that in base code. But I guess what Max is saying is because you're operating a centralized sequencer and you can do things like prioritize your transactions, he's trying to link that to meet the definition of a securities exchange. I think this is where things get a little tribal because, of course, Max is now, he's Team Solana, right?

David Hoffman:
[46:36] Team Solana, yeah.

Ryan Sean Adams:
[46:37] So he's like, well, we have a layer one. We don't have a centralized sequencer. Our sequencers are all of the validators in our network. And he's trying to say like layer ones like Solana or even Ethereum layer one would never be a securities exchange, could never be securities exchange. Whereas these layer twos like base.

David Hoffman:
[46:56] And he's pointing his finger at base and saying, but they're a securities exchange.

Ryan Sean Adams:
[47:01] Or anything with a centralized sequencer,

David Hoffman:
[47:03] You could say. Yeah.

Ryan Sean Adams:
[47:04] So, okay, what's the take then here? Like, who's right?

David Hoffman:
[47:08] Okay, well, my take is I think it is good for us as an industry to... Like, admit that we don't want pinky promises from centralized sequencers about how they are not going to be opinionated about ordering transactions. Right. So I agree with Jesse and Paul. Again, if they are saying these things, and I'm always trying to be careful, maybe if they were here, they would say things slightly differently. But if they are saying what I think they're saying, which is they are unopinionated about all ordering of transactions. They have this algorithm, which is whoever pays the most gas. And then after that, it's a first in, first out basis. And we don't touch that. And those are the rules. but that's a pinky promise you don't actually know there's no like assurances that that is always going to be the case and in theory they could change that uh and so no they are not matching the buyers and sellers of securities so no they are not a securities exchange because i'm a lawyer i'm a securities lawyer i know these things uh and also as an industry it would be good for us to not just accept pinky promises from our layer twos about how they are not going to in the future.

Ryan Sean Adams:
[48:14] Yeah that's true i mean but you could imagine let's say the the sec through some sort of rulemaking or something does come up with a bright line test that basically says hey if you're layer two and you're running a centralized sequencer then you are a securities exchange and you have to come get this additional license from us right if they created such a bright line test they'd have to actually define what like a sufficiently decentralized sequencer set even looks like what would that be who knows right it could be something arbitrary but let's say you have to have like you know, more than three different sequencers outside of your centralized sequencer.

David Hoffman:
[48:52] Three legally independent entities, yeah.

Ryan Sean Adams:
[48:54] Okay, if that's the case, Base could also just do that in the future too. I don't think that this is like...

David Hoffman:
[49:00] They are thinking about a network token.

Ryan Sean Adams:
[49:03] Starknet already has decentralized sequencing going on. Actually, you know, Kraken's ink chain, they're exploring the path towards decentralizing their sequencers. So they could all do that. So it's not like a gotcha, you know, for base. So I guess I don't understand that piece of it. But I also don't understand the, like, why are we telling teacher? Like, why are we going and calling teacher to just like settle our decision?

David Hoffman:
[49:29] They're a centralized securities exchange. They're processing securities.

Ryan Sean Adams:
[49:34] Yeah. I mean, from like a base crypto values perspective.

David Hoffman:
[49:38] Yeah.

Ryan Sean Adams:
[49:38] Right? Like, how much do we care? I care that a centralized sequencer is front-running me. That's a thing I care about. Do I care that the SEC labels them an exchange or not? No. Not really.

David Hoffman:
[49:52] No, I don't care about that.

Ryan Sean Adams:
[49:54] Well, this is a take that people like Jake Kravinsky have given as well. So Jake says this, Don't know who needs to hear this, but the second you start seeking a regulatory moat for your chain at the expense of the competing chain, you're no better than the predatory, tradifying comments we came here to defeat.

David Hoffman:
[50:10] I don't know who needs to hear that. Couldn't know.

Ryan Sean Adams:
[50:16] So there we go.

David Hoffman:
[50:17] He's not the only one. So Dan Robinson from Paradigm, he tweeted out, I think it's bad form and a bad strategy to try and summon the regulatory demon to strike down your competitors over technical or ideological disagreements. Where will you hide when the demon turns around on you? You know who I don't want to go up against? Coinbase is legal and lobbying arm.

Ryan Sean Adams:
[50:39] I know. I don't know why people are picking fights there. We got to stay unified. It's us against the banks. I mean, we just had some...

David Hoffman:
[50:46] It's us against the banks. It's always us against the banks. Thank you.

Ryan Sean Adams:
[50:48] Thank you, David. We shouldn't need to say that. We're saying it. David, this is some cool news. You know how we've been talking about X402, which is this payment standard that Coinbase has helped pioneer, the Ethereum Foundation, basically a standard that allows a machine to use cryptocurrency or stable coins. Well, Cloudflare has announced that they are working with Coinbase on the X402 standard. Do you know what Cloudflare does, really?

David Hoffman:
[51:17] Yeah, it's like a condom for websites.

Ryan Sean Adams:
[51:20] Yeah, yeah, sure. Exactly. Is that right? Well said. Yeah, well said. They're just like an internet gateway, basically. So they'll filter things out. And I mean, they're pretty widely deployed off of, you know, like on most websites that you visit.

David Hoffman:
[51:34] To seeing it, yeah.

Ryan Sean Adams:
[51:35] Yeah, and so they'll basically be like, oh, they'll screen out bot traffic. And so one of the things that they've been doing is there's like this robots.txt file inside of a website. And if a bot is detected, right, Cloudflare will screen out the traffic before it actually pings the website itself. Anyway, so it's like, it can block AIs. Right. That's a lot of power. And because Cloudflare is deployed across most of the internet, It gives them the ability to actually incorporate this X402 standard and

David Hoffman:
[52:09] Give ARs a way to pay for the service.

Ryan Sean Adams:
[52:11] Yeah, they could be a distribution arm. So Coinbase, cryptocurrency, X402, now Cloudflare.

David Hoffman:
[52:18] All right, our last bit of news of the week. Not actually crypto news, but I think you'll hear why it's relevant. Vietnamese banks began deleting more than 86 million bank accounts to fight fraud and enforce biometric identification requirements. This was orchestrated by the State Bank of Vietnam, that's their central bank, and affected about 43% of all registered accounts. They were made inactive, unfairified, or potentially used in fraudulent schemes. So those ones that were identified to be as such were flagged and then deleted. And so after verification, 113 million personal and then almost a million organizational accounts, like business accounts, remained active out of 200 million. So bank accounts getting deleted.

Ryan Sean Adams:
[53:02] Yeah, it's crazy how this was done. So this was all part of a digital transformation initiative. It's like a five-year digital transformation initiative.

David Hoffman:
[53:10] That sounds scary. I don't like those words.

Ryan Sean Adams:
[53:12] It can be scary, right? It can be moving into the future. I guess crypto is a digital transformation of sorts.

David Hoffman:
[53:19] Yeah, but it's not an initiative. It's a revolution.

Ryan Sean Adams:
[53:21] Well, in this case, basically, digital app. So all citizens have a digital app with a nation state ID. And on your digital app, of course, there's biometrics. So I can look at your face and confirm that it's David and authenticate that this is your face ID. And now that same infrastructure, the digital ID app, basically being used to, you need that in order to open a bank account anywhere in Vietnam. And not only that, you need authentication through that digital app in order to keep your existing bank account. Not only that, in order to send any money above 750 US, I did the currency conversion, 750 US dollars, you need to actually give your biometric signature in order to send those funds. And so it's a complete bank style, like we can turn off your bank account and then nation state style, we can turn off your bank account, we can debank you, we can do whatever we want. We now have all the levers. And of course, they're doing this because they say there's all sorts of fraud, there's all sorts of money laundering going on, we want to verify all these accounts are real fraud. citizens, basically. The problem is it's just pooling all of that power in the central government.

David Hoffman:
[54:38] Yeah. Like in theory, if every human on earth was good and we just didn't have evil, this would be fine. It'd be great.

Ryan Sean Adams:
[54:46] It'd be great.

David Hoffman:
[54:46] And like when I, when I, I used to have to pay on my phone all the time. So it like looks at my face is like, it's that David Hoffman. Oh, that is David Hoffman. Let me like go ahead and okay this transaction. Granted that is staying inside of my phone. And And thank God Apple has like privacy values. Yeah. But like there's elements of this. It's like a double edged sword, dude. Like I'm sure the UX is great. And like I do want my identity to be verified in some way before my money gets sent. Like on a surface, that's great. But it's when the government does it. I think that's the point.

Ryan Sean Adams:
[55:18] David. I think there's like digital transformations without civil liberties. And then there's digital transformation that preserves some civil liberties. And those two things are completely different. Yeah.

David Hoffman:
[55:27] They look very similar. They look very similar.

Ryan Sean Adams:
[55:30] And some people say, oh, this could never happen in the U.S., for instance. But I don't think that's true. I don't think that's true. Like, we have all the components. We already have a national ID.

David Hoffman:
[55:39] Dude, what do you think Elizabeth Warren would love to do? It's exactly this.

Ryan Sean Adams:
[55:43] Like, the laws on the books, the Bank Secrecy Act is kind of this. It's unbanking authority. If you just widen that a little bit, we've got smartphones widely deployable. If we went through a digital transformation without civil liberties, we could do this in a few years,

David Hoffman:
[55:57] Basically. Oh, yeah. Yeah.

Ryan Sean Adams:
[55:59] The only exit here is crypto.

David Hoffman:
[56:01] Totally.

Ryan Sean Adams:
[56:02] And this is what I see for Vietnam, but this is what I see for any country, any citizen of the world. Like, the digital transformations are going to, like, centralize more of our finance layer, and crypto is the only thing that remains decentralized.

David Hoffman:
[56:16] Dude, thank God for crypto, man. Like if we didn't have crypto as like this exit valve and like all of this stuff that is happening in the world, like AI and facial recognition and drones and like whatever this is. It's a dark place, right? If all of that was happening and we didn't have crypto as like a massive check on power, I'd be really scared.

Ryan Sean Adams:
[56:36] Yeah. Well, still a little bit scared, but you know.

David Hoffman:
[56:38] Still a little bit scared.

Ryan Sean Adams:
[56:39] We're on the crypto side, so let's end with this.

David Hoffman:
[56:42] The nation state can delete my identity, but they can't delete my Ethereum account.

Ryan Sean Adams:
[56:46] There you go. Crypto is risky. You could lose what you put in, but we're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.

Music:
[57:04] Music